January 20, 2011

Chairman Darrell Issa

Oversight and Government Reform Committee
Washington, D.C. 20515

Dear Chairman Issa:

On behalf of the domestic textile industry, I would like to congratulate you on your recent
appointment to the Chairmanship of the Oversight and Government Reform Committee. On
behalf of the domestic industry, the National Council of Textile Organizations (NCTO)
appreciates the opportunity to provide information to the committee regarding costly government
regulations.

NCTO is extremely concerned with the scope and impact of the volume of regulations that are
being proposed or are under review by the federal government. NCTO is carefully assessing the
impact of excessive regulations on the U.S. textile industry as a whole. We are concerned that
Administrative agencies are working on two separate but important fronts, to create new
regulatory burdens through implementing legislation recently passed by Congress or to
reinterpret existing regulations in a manner that increases employer cost and reduces
competitiveness. These recent actions are causing enormous concern and are creating a
tremendous amount of uncertainty among U.S. textile manufacturers. Both aforementioned
scenarios have the potential to increase significantly the cost of manufacturing in the United
States. As the cost of manufacturing increases, our member companies are forced to reduce or
eliminate operations and cut their workforce. Mr. Chairman, we do not believe that a textile mill
should close nor should its workers lose their jobs due to government regulation that is over
burdensome. Following is an initial list of the major regulatory issues that concern the industry
at the current time; we will keep you updated as we obtain additional information about other
proposed regulations from our member companies.

NCTO has outlined the Top Five Regulatory Burdens to the U.S. Textile Industry:

1. Customs and Border Protection – Textile and Apparel Fraud

The Customs and Border Protection (CBP) agency estimates that $1 billion in duties goes
uncollected by the general Treasury each year due to illegal entry of textile and apparel items
into the United States.

910 17th St., NW · Suite 1020 · Washington, DC 20006

202-822-8028 · fax: 202-822-8029 · www.ncto.org
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Over the past several years, the U.S. textile and apparel industry has been plagued by high levels
of fraudulent activity by an increasing number of importers. This has included duty evasion in
trade preference areas, undervaluation of apparel from China and front companies posing as U.S.
manufacturers. These schemes have had a damaging effect on the domestic textile industry
while also cheating the U.S. Treasury out of an estimated $1 billion or more in uncollected duties
and penalties in textiles and apparel.

A recent analysis of Mexican denim figures showed that as many as one-third of all denim
trousers imported from Mexico were illegally made with Chinese fabric. This single instance
cost the U.S. Treasury approximately $50 million in uncollected duties. Mexican Customs
reports that billions of dollars worth of Chinese yarns and fabrics are suspected of using the “in
bond” system to bring Chinese yarns, fabrics and apparel into Mexico where it is then
repackaged as “Made in Mexico” and sent to the U.S. duty free.

In addition, U.S. Customs and Border Protection (CBP) textile verification teams are routinely
reporting non-compliance rates averaging 40 percent during plant visits to the CAFTA and
Andean countries.

These non-compliance rates are occurring while U.S. Customs and Border Protection (CBP) has
steadily moved resources and attention away from commercial textile enforcement. In the
Textile/Apparel Policy & Programs Division at the national headquarters staffing is down 40
percent, compared to five years ago, despite an increase in imports and the removal of quotas.

While our national security must always be the top priority, our economic security is also
important. We urge you to investigate whether U.S. Customs textile and apparel enforcement
focus and capabilities have been allowed to erode to the point that they have damaged our
industries economic competiveness and are causing enormous revenue losses to the U.S.
Treasury.

2. Consumer Product Safety Commission – Consumer Product Safety Improvement

Act
The Consumer Product Safety Commission has issued regulations to implement the Consumer
Product Safety Improvement Act (CPSIA) passed by Congress in 2008. The original intent of
the statute was to address lead in toys imported to the U.S. from China. However, the law
applies to all items, including textiles and apparel, for children up to age 12. In 2010, the
commission issued a stay of enforcement on the testing and certification rule for one year after
fiber, yarn, fabric, apparel, and retail companies provided the agency extensive testing
documentation proving that textiles and apparel do not contain lead regardless of whether the
products were made of natural or manmade fibers. Unless the stay of enforcement is renewed,
testing and certification will be required beginning in February 2011. Testing and certification
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costs for companies are staggering, totaling tens of millions of dollars each year. Such tests will
be required for every type of product, in every color and style. Companies at each stage of the
supply chain will have to conduct the necessary testing to document that their products are lead
free.

Even if the stay of enforcement is extended for testing, the law requires that companies must
permanently affix tracking labels to every product sold to consumers. The tracking label must
include the source of the product, the date of manufacture, and other information such as a batch
or run number. Adding tracking labels will cost industry millions of dollars each year as
companies are forced to adapt manufacturing and recordkeeping processes to comply with the
law.

3. Environmental Protection Agency – Greenhouse Gases

In 2010, the U.S. House of Representatives passed the controversial American Clean Energy and
Security Act, which would have put our domestic manufacturing sector at a significant
competitive disadvantage in the growing global economy. The legislation would have increased
the industry’s energy costs dramatically, while providing China and our other principal overseas
competitors with new competitive advantages.

The House of Representatives did pass a comprehensive energy bill that the Administration
bolstered as a priority yet in the absence of Senate approval, the Environmental Protection
Agency has begun implementing regulations based on the Administration’s energy policy. In
December, the EPA announced that it plans to begin regulating emissions from power plants and
oil refineries. NCTO is deeply concerned that the EPA will use this recent regulatory action as
precedent for regulating industrial sources in the future. In addition, these regulations would
directly impact our business costs and ability to remain competitive globally.

The new Congress, not the EPA, should develop energy policies that have a business-minded
approach that achieves the goal of substantially reducing greenhouse gases and carbon
emissions. Because of the issue’s complexity, Congress should legislate a solution that
simultaneously supports economic growth while making U.S. manufacturing more competitive
globally.

In addition, the EPA is also considering regulations to limit greenhouse gas emissions from
industrial boilers, which would have a direct impact on textile companies. Boilers are costly and
vital components in the production of textile and fabric products. The proposed EPA regulations
would force companies to spend time and money to prove to regulators that the facility is below
the standards set in the proposed regulation. Regulations are in place already that require
companies to meet strict standards, but the new rules would expand coverage of the regulations
to minor sources and require extensive testing to verify compliance. Companies have three years
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to bring existing boilers into compliance, but new and rebuilt boilers will have to comply as soon
as the rule is finalized. Compliance costs and paperwork burdens will be prohibitive for small
companies. We must ensure that these unnecessary burdens and regulations are not imposed on
businesses.

4. National Labor Relations Board – Posting of Employee Rights

The National Labor Relations Board has proposed a rule that would require virtually all U.S.
employers to post information about employee rights under the National Labor Relations Act.
Companies that communicate via email or electronic means with employees would also be
required to send this information electronically. Unlike other mandatory information that must
be posted for employees, the NLRB does not have direct statutory authority to mandate this
action. NLRB has proposed the rule because the Board believes (without citing actual evidence)
that American workers are largely unaware of their collective bargaining rights. This assertion is
widely disputed and NCTO believes that workers are fully aware of their rights in the workplace
and clearly understand that workplace complaints can be filed with the NLRB, the U.S.
Department of Labor, and the Equal Employment Opportunity Commission (EEOC). Further,
NCTO members strive to fulfill the letter and spirit of the laws meant to protect the health and
safety of the workers who are employed by the industry. This rule is a clear overstep on the part
of the NLRB and means more regulatory burdens on U.S. businesses.

5. Occupational Safety and Health Administration – Occupational Noise Standard

The Occupational Safety and Health Administration has issued a new interpretation of its
provisions for “feasible” administrative or engineering controls of occupational noise. Current
OSHA regulations allow for workers to utilize personal protective equipment (PPEs), such as
earplugs, to be used to block out excessive noise. OSHA regulators are proposing to require
businesses to go even further. Incredibly, the proposed regulatory change does not regard the
cost of compliance as a major consideration. The proposed regulation provides for two types of
controls: administrative and engineering controls. An example of an administrative control
could be rotating workers in and out of noisy areas, a sure fire way to disrupt already safe and
productive operations by requiring that workers be cross trained on multiple types of machinery.
An example of engineering controls could mean installing expensive noise dampening
equipment or requiring that machinery and workers be housed in separate locations. This type of
‘fix’ could be extremely expensive and seems to be a solution in search of a problem that has
already been solved by existing workplace practices. Further, these regulations would be
economically devastating for those smaller-sized manufacturers that make up the bulk of the
U.S. textile industry.

Chairman Issa, NCTO appreciates the opportunity to provide both you and the committee with
feedback regarding costly government regulations and waste. As we noted, NCTO will be doing
an intensive review of other regulatory burdens and will update you further as we progress.
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NCTO would be pleased to meet with you or a member of your committee staff to discuss
further our regulatory concerns. If you or your staff would like to be in contact with NCTO,
Sarah F. Pierce can be reached at (202) 822-8026 or Spierce@ncto.org.

Sincerely,

David Hastings
Chairman
Mount Vernon Mills – CEO